European shares recover as hopes for a US rate cut improve sentiment; Ukraine talks in focus

European shares rallied on Monday, with the financial sector leading the way, as investors took comfort in growing commitment to US interest rate cuts while monitoring progress on a peace plan for Ukraine.The pan-European STOXX 600 gained 0.6% to 565.27 points by 0815 GMT. The index recorded its steepest weekly decline since late July on Friday.

Investors on Friday cheered comments from U.S. Federal Reserve policymaker John Williams, who said rates could fall “in the near term,” raising the likelihood of a rate cut at the Fed’s December meeting.

The comments come as other policymakers warned against further cuts until there is more clarity about the US economic health.

Heavyweight banks and technology stocks rose 1.1% each, while industrials rose 0.6%.

Meanwhile, the US and Ukraine will continue work on a plan on Monday after agreeing to amend an earlier proposal widely seen as too favorable to Moscow. Defense stocks in Europe fell more than 3% on Friday as peace talks progressed. On Monday they fell 0.4%. Bayer gained 8.9% to top the STOXX 600 after the pharmaceutical company reported positive study results for its anticoagulant asundexian on Sunday.

This week, investors will be eyeing the UK’s annual budget amid uncertainty over tax hikes on Wednesday and US economic data throughout the week.